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18/4/2018 — General
Fletcher details new financing
By Simon Hartley

Under fire Fletcher Building Ltd (NZX & ASX: FBU) has launched a $1.25 billion refinancing package, with a fully underwritten $750 million offer to shareholders plus inked a new $500 M standby banking facility.

Fletcher shares were placed on a trading halt yesterday.

The standby $500 M facility, with ANZ, Westpac and MUFG Bank of Japan, can only be used to help fund repayment of US Private Placement notes worth $1.11 B.

Fletcher, which broke some banking covenants, has until the end of the month to conclude negotiations with USPP, or redeem the notes. To a backdrop of its lowest share price in a decade and swirling speculation on the possibility of takeover offers, Fletcher unveiled the package yesterday, which includes numerous assets put up for sale.

They include its Formica division and Roof Tile businesses, which last financial year had respectively earnings before interest and tax (ebit) of $88 M and $13 M.

Fletcher said yesterday “discussions with the USPP noteholders are ongoing and Fletcher's objective and expectation is that it will achieve a mutually acceptable outcome in the negotiations.”

In the past two years, accumulated and estimated losses from its Building + Interiors (B+I) division have hit $952 M, while Fletcher's market capitalisation has taken a $1.6 B hit as the B+I issue unravelled during the past six months.

The pro-rata one share-for-4.46 shares offer to shareholders is at $4.80 a share, a 23% discount on its last trading price of $6.27. Proceeds from the $750 M placement would be tagged to pay existing bank debt of $714 M.

Craigs Investment Partners broker Peter McIntyre said Fletcher had “covered all its bases” in recapitalising through the placement, selling assets and the standby bank facility. It was now in a position to redeem the USPP notes if they were called in; plus pay costs if required.

“It's enough to steady the ship for now,” he said. There was potential for more asset sales, but Fletcher was now in a position where it did not have to make “forced sales.” at discounted prices.

He believed the 23% “deep discount” to existing shareholders would be attractive for them to participate.

Forsyth Barr broker Damian Foster said there were “more moving parts than expected'' in the announcement, with the spread of capital raising, assets sales and new standby banking facility.

“(However), it should all come together and put the company back in a good position,'' he said. Given the deep discount on the offer price, shareholders would be expected to support the offer, or face their own stakes becoming diluted by the extra shares on issue.

Fletcher said its strategic business review was progressing and it was focussing its activities on NZ and Australia, prompting the Formica and Roof Tile sales.

B+I's estimated $660 M loss was unchanged, with Fletcher updating that five projects were complete, including loss-making Justice precinct in Christchurch and seven were targeted for completion by year-end. Four more were still under construction, which included the international conference centre in Auckland and adjacent hotel.

Fletcher reiterated earlier guidance, with no change to an estimated earnings before interest and tax of between $680 M-$270 M; which excludes the B+I full year 2018 loss of $660 M and other significant items.

*Simon Hartley is senior business writer and assistant chief reporter for the Otago Daily Times.

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